The U.S. Congress is currently writing the 1990 Farm Bill that will establish the direction of U.S. farm policies into the mid-1990s. The political process generating this new farm legislation involves input from many sources, including farmers.

The interpretation of U.S. farmers’ opinions on agricultural and trade policies is usually left to the commodity and farm organizations that lobby on behalf of their members. Unbiased evaluation of farmers’ opinions across many commodities and organizations is seldom done. Statistical analysis of farmers’ opinions based on a scientifically designed survey instrument, such as the one used in this study, thus can help policymakers and policy analysts more comprehensively understand what U.S. farmers desire in farm legislation, and what socioeconomic factors may influence their preferences.

Farmers normally act in their own economic self-interest and attempt to maximize the present value of expected profits from their operations (Edelman and Lasley). This implies that a farmer will support (oppose) policies that offer higher (lower) expected benefits relative to the alternatives. The level of support or opposition for various agricultural and trade policies may be explained by differences in farmers’ socioeconomic characteristics such as education level, age, farm organization affiliation, gross farm sales, farm type, off-farm income, program participation, and geographic region.

Data

This study is based on survey data from U.S. Farmers’ Preferences for Agricultural and Food Policy in the 1990s (Guither, et al.). The survey sample consisted of 12,778 farmers from 21 states and was judged representative of all U.S. farmers. These 21 states represent two-thirds of the nation’s cropland and account for 58 percent of all farms in the nation. Farmers in these states produce over one-half of all U.S. farm production, including 70 percent of the food grans, 71 percent of the feed crops, 71 percent of the soybeans, 60 percent of the cotton, and 70 percent of the livestock.

The survey collected information on farmers’ preferences on a variety of agricultural issues, including the future direction of commodity programs, conservation policies, and international trade. Socioeconomic data also were collected.

Farmers’ Preferences

The discussion of farmers’ policy preferences is divided into two parts. First, the overall results are summarized. Second, the influence of various socioeconomic factors on farmers’ preferences are considered. The following policy issues were selected for analysis: direction of general agricultural commodity policy, target price and loan rate policies, dairy policy, crop insurance and disaster programs, the Conservation Reserve Program, conservation compliance requirements, reduction in international trade barriers, and the Export Enhancement Program (EEP) (Table 1).

Overall Results

General Farm Policy. Over one-half of the survey respondents wanted some kind of price and income support program. About one-third wanted to keep the present program, 11 percent preferred mandatory controls, and 8 percent preferred decoupling of payments from production requirements. However, about one-third wanted to gradually eliminate commodity programs, including acreage set aside and deficiency payments.

Target Price Policy. Target prices are a popular part of the current price and income support program. A majority of farmers preferred the continuation of target prices; 38 per­cent wanted to raise them; 12 percent favored present levels; and 9 percent wanted to lower them. However, about one fourth wanted to phase them out.

Loan Rate Policy. The most preferred loan rate policy was to base loan rates on a five-year average of market prices to keep prices competitive (36 percent). However, a similar number (34 percent) wanted to eliminate loan rates and com­modity loans. About one-fifth wanted higher loan rates.

Dairy Policy. Among all farmers, responses were divided on future dairy policy. Although 37 percent favored some type of dairy price support program, 17 percent favored the current program, while 15 percent preferred a system that bases the milk support price on the average cost of produc­tion and establishes a production quota for each producer. Five percent wanted the Secretary of Agriculture to have more authority to set the milk price support. However, 29 percent favored phasing out all dairy price supports over a period of years. Thirty-four percent were either not sure or did not reply.

Crop Insurance. When asked what our national policy should be to protect farmers from production risks as­sociated with natural disasters, farmers expressed a diver­sity of views. One-third wanted to keep the current voluntary crop insurance program, 21 percent preferred a limited dis­aster assistance program in years of severe drought with no crop insurance program, 13 percent preferred a mandatory crop insurance program, and 11 percent preferred the elimination of both crop insurance and disaster programs. The remainder were not sure or did not reply.

Conservation Compliance. Farmers were found to be very supportive of present government conservation efforts. Sixty percent favored soil conservation compliance as a con­dition for receiving commodity program benefits.

Conservation Reserve Program. The Conservation Reserve Program (CRP), established in the 1985 Food Security Act, received strong support. Among all respon­dents, only about one-fourth wanted to eliminate the program, while the remainder wanted to keep the acreage at the present level or expand it.
Trade Barrier Reduction. It is unclear if any substantial progress will be made in the current Uruguay Round of GATT negotiations, and if so, how the negotiations will af­fect U.S. farm policy. The GATT negotiations are scheduled for completion in December 1990. Survey results indicated that farmers generally favor freer trade and support U.S. government efforts to improve international trade relations. Among all farmers, 71 percent agreed that the United States should negotiate world-wide reductions in trade barriers.

Continuation of the Export Enhancement Program. The EEP is a program primarily targeted towards regaining markets lost by the United States. Initially, the program targeted Middle Eastern and North African countries where wheat sales had been lost to heavily subsidized exports from the European Community. Later, EEP subsidized sales were expanded to the USSR, China, and others. Of all commodities, wheat exports have been assisted the most.
Despite the fact that 85 percent of the EEP funds have been used to subsidize wheat exports, almost one-half of all farmers agreed that the EEP program should be continued. Only 12 percent disagreed. However, 40 percent were not sure or did not respond.

Socioeconomic Factors

A statistical procedure called a logit model was used to identify those socioeconomic factors that influence U.S. farmers’ agricultural policy preferences. A logit model was specified for each survey question. Each policy response was combined into one of two options: continued government intervention or less government intervention. This definition allows comparison across all types of policies. Although some specificity is lost when response categories for the policy alternatives are collapsed, this technique can ascertain and analyze farmers’ basic preferences for government intervention in agriculture. The statistical results from the logit analysis are summarized in Tables 2 and 3.

General Policy. Less government intervention was defined as elimination of commodity programs. All other policy choices were classified as continued government intervention.
Farmers with a college education and livestock producers favor the elimination of all commodity programs. However, grain farmers, those farmers who earn at least $20,000 of off-farm income, Southern farmers, participants in the corn and wheat programs, and Farmers Union members favor continued government intervention. Other socioeconomic factors such as age and gross farm sales give inconclusive results, i.e., not statistically associated with continued or less government intervention via commodity programs. With this information on farmer characteristics, it was possible to predict with 67 percent accuracy farmers’ general farm policy preferences.

Target Price Policy. For target prices, a continued government program option was a combination of respon­ses to continue present target prices and to increase target price levels. Less government involvement was defined as lower target prices or elimination of target prices. Two thirds of the responses were correctly predicted.

Grain farmers support an increase in, or at least a continuation of, target prices. On the other hand, livestock producers would rather see target prices lowered or phased out. Livestock producers may oppose target prices because only grain producers receive this subsidy. Furthermore, high target prices may have helped lower input costs for livestock producers, since historically deficiency payment incentives have stimulated grain production (more yield increasing input use) that lead to increases in grain stocks and downward pressure on feed grain prices.

Com and wheat program participants and Farmers Union members favor relatively high target prices. Farmers with a college education prefer lower target prices or their complete elimination.

Loan Rate Policy. The loan rate policy responses were collapsed into two choices: continued government involvement (base loan rate on five-year average of market prices and raise loan rates) and less government involvement (lower loan rates). The statistical model correctly predicted about two-thirds of the responses.

Farmers with some college or technical school training prefer lower loan rates. As farmers become more educated and improve their management and marketing skills, they apparently think that government programs are less necessary to maintain a profitable business. Also, more educated farmers may better understand how lower loan rates help keep U.S. grain prices internationally competitive.

Grain farmers, including participants in the com and wheat programs, prefer to continue current loan rates or raise them. However, livestock producers strongly favor a reduction in loan rates. This is likely due to their recognition that lower loan rates can reduce their feed costs.

Farmers Union members support higher loan rates. Farmers in the South prefer continued government interven­tion via loan rates. Also, farmers with greater dependence on off-farm income favor relatively high loan rates.

Dairy Policy. Less government intervention was defined as phasing out all dairy price supports, while continued government intervention included the current price support program, a production quota option, and greater authority for the Secretary of Agriculture to set dairy price supports. The model correctly predicted about two-thirds of the dairy policy preferences.

College educated and livestock farmers prefer a phaseout of the current dairy program. Dairy farmers, however, do not Farmers Union members and farmers with greater dependence on off-farm income favor continued government intervention.

Crop Insurance. Crop insurance and disaster payments are controversial with special concern over associated budget costs and whether these programs effectively protect farmers from crop production risks. Information on farmers’ socioeconomic characteristics predicted correctly 89 percent of their preferences of less versus continued government intervention via crop insurance and disaster programs.

Livestock farmers and farmers in the Midwest and Western states prefer the elimination of crop insurance and disaster programs. However, larger farmers with annual gross sales over $100,000, participants in the wheat and com programs, and Farmers Union members favor continued government assistance.

Conservation Compliance. Conservation compliance is popular among many farmers (60 percent said yes). The statistical model correctly predicted the responses nearly three-fourths of the time. Continued government involvement was defined as favoring conservation compliance.

Grain producers, including both corn and wheat program participants, tend to disagree with the conservation com­pliance requirements of the 1985 Food Security Act. These results suggest that grain farmers may be concerned about the loss of program benefits if they do not comply with the conservation compliance requirements. Also, conservation compliance may increase production costs and reduce profits as they change tillage systems and crop rotations.

The level of education is a strong indicator of a farmer’s attitude towards conservation compliance requirements. A farmer with college training tends to agree with the requirement.

A higher level of education may contribute to a bet­ter understanding of the environmental advantages and long-run profit benefits from conservation practices. Also, more educated farmers may be better prepared to understand the rules and paperwork associated with conservation compliance.

Older farmers do not favor conservation compliance while younger farmers do. Younger farmers may more easi­ly recognize the environmental benefits, be more willing and able to adjust their production practices and stand to gain economically over time from the adoption of soil and water conservation practices.

The American Farm Bureau Federation and National Farmers Union both officially favor the conservation com­pliance requirements in the 1985 Food Security Act. Farm Bureau members support this view. However, the response from Farmers Union members contradicts the organization’s official position.

Conservation Reserve Program. Continued government involvement included continuation or expansion of the CRP. Less government involvement was defined as elimina­tion of the current program. The model’s prediction accuracy for farmers’ views on the Conservation Reserve Program (CRP) was 71 percent.

Farmers in the wheat and corn programs support the CRP, while livestock producers prefer the elimination of the CRP. From a livestock producer’s perspective, the CRP removes land from production, potentially reducing feed grain supplies and increasing their feed costs. Pastureland also may be reduced.

Farmers with larger gross sales support the continuation of the CRP. These farmers represent most of the land in an­nual acreage reduction programs as well as the CRP, and thus tend to receive a large share of total land retirement payments. By region and farm organization the statistical results were inconclusive.

Trade Barrier Reduction. About three-fourths of the respondents thought the United States should negotiate worldwide reductions in trade barriers. The statistical model for this question correctly predicted 92 percent of the responses.

Farmers with a higher level of education strongly favor a reduction in international trade barriers. These farmers likely have a more global perspective, plus better management skills, that help them benefit from more competitive international markets.

Farmers with larger gross sales apparently expect to benefit from less trade restrictions since they support this policy option. Also, farmers participating in the corn program apparently anticipate economic advantages from a freer trade policy that offers greater access to foreign markets.

Farm Bureau members favor reductions in trade barriers while the results for Farmers Union members are incon­clusive. The views of Farm Bureau members are consistent with that organization’s more market-oriented philosophy.

Continuation of the EEP. The use of the EEP to regain lost market share has been supported by many farmers and policymakers during the last several years. Over one-half of the farmers agreed that the government should continue this policy. The model correctly predicted 80 percent of the EEP responses.

As expected, grain farmers and farmers participating in the wheat program are very supportive of this policy. Since 1985, EEP funds have subsidized about one-half of all U.S. wheat exports.

Farmers with larger gross sales apparently believe they benefit from the program since they favor its continuation. Older farmers, however, appear to be more skeptical about the merits of the EEP and would rather see it discontinued.

Summary

This article reports results from a recent Purdue Univer­sity study that identified several socioeconomic factors as­sociated with U.S. farmers’ preferences for selected agricultural and international trade policies. Using data from a 21-state survey and a statistical methodology called logit analysis, various hypotheses concerning farmers’ policy preferences were analyzed. The empirical results offer ob­jective, scientifically based information on farmers’ policy preferences and their willingness to support various agricul­tural and trade policies in the 1990s.

In general, younger, college educated farmers, livestock producers, and Farm Bureau members favor less government intervention in agricultural policy along with a reduction in international trade barriers. Grain farmers who participate in government programs and Farmers Union members are more likely to favor a continuation of current farm subsidy programs and more restrictive trade policies.

 

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References

Edehnan, Marie A., and Paul Lasley. “An Analysis of the Agricultural and Trade Policy Preferences of Iowa Farm Operators.” North Central Journal of Agricultural Economics 10(1988):245-253.

Guither, Harold D., Bob F. Jones, Marshall A. Martin, and Robert G.F. Spitze. U.S. Farmers’ Preferences for Agricultural and Food Policy in the 1990s. North Central Regional Extension Publication 361, North Central Regional Research Publication 331, Illinois Agricultural Experiment Station Bulletin No. 787, November 1989.

Orazem, Peter F., Daniel M. Otto, and Marie A. Edelman. “An Analysis of Farmers’ Agricultural Policy Preferences.” American Journal of Agricultural Economics 71(1989):837-846.

Shields, Dennis A., Explaining U.S. Farmers’ Preferences for Agricultural Policies, M.S. thesis, Purdue University, May 1990.